U.S. Ready to Join Six-Nation Tax Alliance

May 9, 2014

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CANBERRA, Australia—The U.S. is
ready to join China and four other countries in an alliance to fight efforts by
multinational corporations to avoid paying taxes, according to people familiar
with the matter.

The alliance, an
Australian initiative, will also include Japan and Britain. The U.S. could sign
on this week during a two-day meeting in Tokyo on fighting corporate tax
avoidance, people familiar with the U.S. position told The Wall Street Journal.

"Australia has
pulled together six major countries to sit down and share intelligence on the
activities of multinational enterprises," Australian Tax Commissioner
Chris Jordan told The Wall Street Journal in an emailed response to questions.

"This collaboration
has allowed us to better understand what is happening in our own countries and
determine whether what is being represented in one country reflects what is
being represented in another."

Governments across the
globe are mobilizing to collect more taxes from multinational corporations that
use tax havens and other legal methods to pay minimal or no taxes to national
governments. According to some estimates, the world's governments lose US$3
trillion in tax revenue a year to such efforts.

The Group of 20
industrial and developing economies agreed in February to work to develop
common rules on cross-border taxation to crack down on tax evasion and the use
of international havens such as Bermuda and Ireland. The six-nation alliance is
also intended to advance the G20's stated mission by taking concrete action.
Australia is currently chair of the G20.

Mr. Jordan said tax
officials with national governments need to become more like multinational
companies by organizing on an international scale. He described the new
alliance—which includes the world's three biggest economies—as a much-needed
first step.

It's unclear which
country is the sixth member of the alliance, but corporate taxation experts
believe it to be either Germany or France. Officials from participating
countries have been reluctant to publicly acknowledge their involvement due to
potential for corporations to challenge the legality of cross-border
information-sharing.

Anger over corporate tax
avoidance has risen in recent years, particularly as many governments have
faced ballooning budget deficits and soaring debt since the global financial
crisis.

Some multinational
corporations slash their tax burden in individual countries through legal
methods such as shifting their tax domicile and parking profits overseas. U.S.
law, for example, allows companies to not record or pay taxes on profits earned
by overseas subsidiaries if the money isn't brought back to the U.S.

The biggest U.S. companies, including General Electric Co. and Apple Inc., are
parking nearly US$1.2 trillion in profits offshore, according to a report
released last year by liberal advocacy group U.S. PIRG, which analyzed the
public filings of the top 100 U.S. public companies.

Australia's Mr. Jordan
said he hoped this week's meeting in Tokyo, which is being held by the G20,
would help broaden acknowledgement that G20 members and others need to work
across borders and develop new mechanisms to build a better and fairer
international tax system.